Life, Liberty, Property #137: Supreme Court Struggles to Balance Process and Justice
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- Supreme Court Struggles to Balance Process and Justice
- Video of the Week: AI-Powered Military and Surveillance – In The Tank Podcast #529
- Portland’s Classic Doom Spiral
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Supreme Court Struggles to Balance Process and Justice
A case currently before the U.S. Supreme Court could put an important limit on state and local governments’ authority to take property from people without just compensation. Unfortunately, the oral arguments phase of the case suggests the Court might very well decide against requiring states to do right by their residents, even though at least some of the justices see the situation as unfair.
In Pung v. Isabella County, Michigan, the state seized a property for unpaid property taxes, based on a retroactive decision of the township’s tax assessor to deny a principal residence exemption for some of the local taxes for 2007 through 2011, which the owner, the late Timothy Scott Pung, had claimed in accordance with Michigan tax laws.
Pung’s widow challenged the assessor’s decision, and the Michigan Tax Tribunal agreed with her. That would seem to have settled the matter. The township’s tax assessor then revoked the exemption for 2012, in a move which appears vindictive in addition to ignoring the Tax Tribunal’s earlier decision on the issue.
Mrs. Pung was now hit with a bill for $2,241.93 in unpaid taxes. The county foreclosed on the home, which the Pungs had bought in 1991 for $125,000. The state courts upheld the tax county’s liability claim and foreclosure order.
The whole affair led to a devastating loss for the Pungs. The Epoch Times reports:
The county sold the home for $76,008, and it was quickly resold for $600 over its official assessed value of $194,400. A federal district court ruled the county violated the Constitution by taking more than it was owed, and awarded the estate $73,766, representing the difference between what was owed in taxes and the price the county took in from the sale, the petition said.
The Pungs’ estate argues that the Constitution requires the state to compensate the family for the full loss of value, not just the far-lower number that the state sold the property for: “The estate argues in the petition [to the Supreme Court] that it should have been paid the difference between the taxes owed and $194,400, which it says is the property’s fair market value, and that the lower court rulings violate Supreme Court precedents interpreting the Fifth and Eighth Amendments,” The Epoch Times notes.
In the oral argument before the Court, the estate’s attorney, Phillip Ellison, said the lower court’s decision denies the Pung estate fair compensation under the Fifth Amendment and constitutes an excessive fine prohibited by the Eighth Amendment:
The Supreme Court has repeatedly held that when the government takes property “the constitutional calculus begins with its fair market value” at the time of the taking, he said.
“An owner is owed just compensation, not inadequate compensation,” and governments should not gain a windfall from the sale, Ellison said.
Matthew Nelson, the attorney for the county, defended the Sixth Circuit Court’s decision by characterizing fair market value as an imaginary number: “Property sold … under compelled market conditions, is worth what the market pays for it under those conditions and not what the property would be worth in an idealized private sale,” Nelson told the Supreme Court during oral arguments in the case on February 25.
The Supreme Court is expected to issue its decision by the end of June.
The justices’ questions and comments during the oral arguments focused much on precedent, which is the core of the common law. That is a good development. The Epoch Times story reports,
Justice Clarence Thomas told the lawyer that English and American legal traditions “seem to permit these sorts of foreclosures.”
Justice Sonia Sotomayor reiterated Thomas’s point, saying there is a “long, long history of tax foreclosures, of bankruptcy foreclosures.”
“We’ve even had a case on that where the issue is whether the proceeds from that foreclosure have to be fair market value, and we’ve said no,” she said.
Another essential component of the common law, however, is for each court to deal justly with the individual case before it. The common law arises from the precedents set by those individual decisions, which is how precedents change and the law evolves to meet new circumstances and novel issues. The fact that states have long engaged in tax foreclosures does not resolve the question of whether “just compensation” has to mean something other than “fair market value.”
The common law establishes such precedents through deliberation on how the law applies to the cases brought before it. In the Pungs’ case, the justices cited the difficulty of determining fair market value and the fact that such losses are common: “in general, foreclosure sales do not produce a fair market value price,” Justice Elena Kagan told Ellison. “In other words, just the fact that, even with a—a very fair auction system, just the fact that a property is being offered for sale in those circumstances means that there’s going to be a depressed price.”
Kagan used the word “empirical” multiple times to indicate that “fair market value” is a squishy term that courts have not used in the past.
“Give me a holding from a court in our 250-year history where we have said that the measure of damages on a tax foreclosure is fair market value, not the auction price,” Kagan said to Ellison. Ellison was unable to do so.
Justice Samuel Alito asked why the Pungs did not use some of the house’s equity to secure a loan to pay the tax: “If they had 200—$190,000 equity in this house, could your client—couldn’t your client have gotten a loan using that as collateral, paid the taxes, and there never would have been a sale?”
The seizure of the house prevented that, Ellison told the Court: “In—in reality is that many times the—the foreclosure process itself does prevent practically individuals from going out and being able to dispose of that property on the terms that they themselves would do because we’ve crossed over into the foreclosure process.”
Justice Ketanji Brown Jackson argued the Pungs were entirely responsible for their loss at the hands of the state. Here’s how the Epoch Times story reported it:
… Jackson told Ellison she was “really struggling” with the idea that “just compensation is necessarily always tied to the fair market value.”
Even though the government’s only interest is in covering the tax liability, she said Ellison’s argument seems to “turn the government into Mr. Pung’s real estate agent with some sort of fiduciary duty to maximize … the value of this asset.”
If Pung wanted to obtain maximum value for the house to cover the debt, he could have sold it himself to obtain the fair market value, Jackson said.
That is a callous and even senseless argument, in my view. Pung did not know that the local government was going to seize his house after his death. Are we supposed to sell our house every day and buy a new one, to keep ahead of local-government thieves?
The same was true of his heirs thereafter: they had thought the matter was settled and they did not owe the county anything. The Pungs understandably saw themselves as under no obligation to lend the county government $2,241.93 while the matter was adjudicated once again.
The justices brought up other options the county could have explored. “Well, how about, Mr. Liu, that—a rule that would say there’s the house, but there was also a car, and the car could have satisfied the $2,000 debt?” Kagan asked federal Assistant Solicitor General Frederick Liu.
Liu argued that a government has the right to obtain the money any way it sees fit:
We don’t think the Takings Clause constitutionalizes that rule. We think the Takings Clause doesn’t address the antecedent question of what property can be taken for public use. Gather—rather, it addresses the—the—the subsequent question of, if you take property for public use, what is the just compensation. But I—I just want to address the merits of this personal property exhaustion rule. There’s no need for such a rule because, if the taxpayer wants to sell his Peloton bike to satisfy his tax debt, he is free to do so any day of the week. In fact, our foreclosing on it would make it more difficult for him to sell it.
So, if, indeed, Mr. Pung thinks “the way to satisfy my tax debt is to sell my Peloton bike,” there’s no need for a rule that forces him to do that.
Chief Justice John Roberts asked “what if the only thing he has to sell is his house?” Liu said Pung was entirely responsible for the problem: “I think what’s unusual about this case is that instead of paying the tax and then challenging it, Mr. Pung just—just wanted to litigate all the way through without paying the tax at all.”
Although the question before the Court may look abstruse and arcane, it deals with a fundamental concern that only courts can resolve: what is fair in a particular case with its unique series of events. The Pung case looks inherently unfair. Justices Sonia Sotomayor engaged that issue directly:
That’s the problem, Mr. Liu, because you get into a situation like this one that Justice Barrett very eloquently described as feeling like fundamentally unfair. They’re fighting over a $2400 tax debt that at least two courts said wasn’t owed, and yet they [meaning the county government] plowed ahead and got a—a price half the amount of the value of the property that was flipped for the value of the property.
At some point, doesn’t the Constitution have something to say under the rubric of what a just compensation is? I mean, is it just to give the state that much leeway? … Shouldn’t the minimum require a little bit more?
Liu stuck to precedent in his reply, and Sotomayor continued to pursue how to apply that to the facts of the present case:
MR. LIU: I don’t think the Takings Clause speaks to those issues. I mean, to the extent the—
JUSTICE SOTOMAYOR: So what would?
MR. LIU: Well, I think these sorts of issues about when a foreclosure is appropriate have typically been the province of federal and state statutes, and those statutes have proven perfectly competent in addressing those issues—
JUSTICE SOTOMAYOR: Not here.
MR. LIU: —for centuries.
JUSTICE SOTOMAYOR: Not here. That’s the claim.
Though acknowledging the facial unfairness of the situation, Barrett explored the difficulty of fitting the circumstances of this case to the Takings Clause:
JUSTICE BARRETT: So, counsel, I—I want to echo what Justice Gorsuch said. I mean, it seems like there was some real unfairness to your client. I mean, frankly, reading the briefs, it sounds to me like the tax assessor was like Inspector Javert, but it was even worse because Jean Valjean hadn’t stolen the bread [in this case]. I mean, you didn’t even—
(Laughter.)
JUSTICE BARRETT: —you didn’t even owe the tax, and it’s this small tax and—and the big—you know, the big loss of the family home and—and of the money. So it—it does seem that there’s some unfairness there. But I’m struggling to see how it fits into the takings framework. Can you tell me of a case that we have that treats the foreclosure of a house as a taking? I mean, Tyler treats the pocketing of the surplus as a taking, but I’m not aware of a case—I just don’t know if it fits this framework. I’m not aware of a case of ours that says that when the government forecloses on the house, as opposed to when it pockets the money, it’s—it’s taken the house. [italics added for clarity.]
Outside of the courtroom, the case seems rather simple. A government taking a house, selling it cheap, and then giving the owner what the bureaucrats got for it means the owner receives much less than the home was worth—its fair market value. That is a loss, and therefore that is a taking, and therefore just compensation must mean the full value of the house at the time of that taking.
If a government were to take your home for a year, allow squatters to trash it, and then sell it and give you the proceeds, would that be just compensation?
Obviously not. That is the question before the Supreme Court in this case It appears that the justices are struggling to balance process and precedent while pursuing justice in this specific case. Clearly, justice requires giving full redress for a government taking. Unfortunately, the Court seems to be finding it difficult to identify a precedent for that.
Sources: Supreme Court of the United States; The Epoch Times
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Portland’s Classic Doom Spiral
In 2020, when the anti-police movement first arose across the United States, we at The Heartland Institute initiated an extensive project to warn policymakers and opinion leaders about the danger they were inviting. At our Heartland Daily News website, we led the way on the issue by reporting regularly on the rising crime and disorder in multiple cities across the country and demonstrating the inevitable consequence: economic and population flight from the destruction. We did this well before others saw the doom loops forming in these places.
Our coverage focused especially on cities such as Portland, Seattle, and Minneapolis, where radical city governments were creating the conditions for deterioration into urban hellscapes in what had always been peaceful, idyllic places.
Our forecasts proved true, unfortunately. Things turned out quite as badly as we indicated they would.
Writing at Real Clear Investigations, investigative reporter Mark Hemingway documents the disastrous consequences of the anti-police, pro-disorder movement in Portland. It is an excellent article that shows exactly how Portland went “from chic to shabby,” as Hemingway aptly puts it. The city’s policies of the early 2020s flowed from a classic extraordinary popular delusion and madness of a crowd, leading to the consequences I forecasted from the beginning.
Portland was an impressively beautiful and peaceful place before the racially charged anti-police hysteria began, Hemingway writes:
Like other big cities with major challenges, such as Chicago and San Francisco, Portland boasts many lovely areas and vibrant neighborhoods. But it is also defined by a range of pervasive problems—including crime, homelessness, drug addiction—that are less the consequences of modern society than self-inflicted wounds created by ineffective policies. If Portland stands out from other beleaguered cities, it is because its decline has been so swift.
Citing President Donald Trump’s harsh but accurate observation that the city appeared “war-ravaged” and “the place is burning down, just burning down,” Hemingway notes that those statements turned out to be true and the city has yet to recover: “in a figurative sense—and at least one literal sense—Trump is right,” Hemingway writes. “Portland is constantly on fire. In the year following July 2024, Portland had 6,268 fire-related incidents—and 40% of the fires in the city are a direct result of Portland’s out-of-control vagrancy.”
Crime and disorder spiraled out of control when the city responded to widespread violent protests (obviously funded and organized in great part by outsiders) by jumping on board the Defund the Police movement and cutting the police budget by $15 million while the state of Oregon removed criminal penalties for possession of hard drugs such as heroin, methamphetamine, fentanyl, and cocaine. The latter was established by a November 2020 voter referendum—madness of a crowd indeed.
Hemingway describes what he calls the “predictable results” of these and other measures, which we predicted at the time:
Portland now has the second-highest crime rate of any city in America, behind Memphis. About one out of every 16 people in the city is the victim of a crime every year. This problem did not happen overnight. In 2017, the city’s Pulitzer-winning alt-weekly Willamette Week ran a feature on car-theft in the city. “At least 102 people in the Portland area have been arrested multiple times in the past year for car theft, though half of 2017’s cases were never prosecuted,” the paper reported. A single 23-year-old homeless woman had been arrested for nine car thefts that year and hadn’t spent a day in jail.
That is an obvious example of insane government policy, and it shows that the city’s cavalier attitude toward crime was already rising before the George Floyd riots of 2020 set off the national mania against police. The so-called reforms in Portland unleashed massive political and social corruption. Hemingway writes,
The city also has much more sophisticated criminal problems. As Minneapolis uncovers evidence that it has lost billions of dollars in fraudulent schemes by the city’s Somali community, Jeff Eager, the former mayor of Bend, Oregon, has published a series of alarming reports revealing that Portland may have a similar large-scale problem with its welfare programs—some of it connected to more menacing kinds of organized crime.
Eager reported on Kevin Daniel Sanabria-Ojeda, “whom authorities say is a member of the violent Venezuelan Tren de Agua criminal syndicate and who was arrested for attempted murder” after he and an accomplice “kidnapped Maria Guadalupe Hernandez Velasquez outside her Seattle home, drilled into her hands with a power drill to force her to provide them her PIN for her debit card, robbed her of gold and cash, shot and wounded her and left her for dead in rural Washington,” Hemingway writes.
That case led to the exposure of an extensive, multistate Medicaid fraud ring in addition to the now-usual criminal disorder and violence in Portland, Hemingway reports:
Somehow Velasquez survived the ordeal and police traced the two criminals to a house in a Portland suburb that police reports describe as a drug den, with “residents possibly using drugs in the back yard, large numbers of people coming and going at night, possibly entire vans full of people, and people being dazed or drugged … and on a few occasions groups of young women or girls being present at the address.”
That house was also listed as the address of Uplifting Journey LLC, an addiction recovery provider that received $2.3 million in state Medicaid funds between April of 2024 and March of 2025. Eager has further documented that owners of Uplifting Journey, Julius Maximo and Espoir Ntezeyombi, have multiple ties to three men indicted in Arizona for setting up a $60 million Medicare fraud ring that was laundering money by sending it to Rwanda. One of the leaders of the Arizona fraud even co-signed the lease on another dubious residence owned by Uplifting Journey in the Portland suburb of Gresham.
When cities across the country unleashed this criminal activity and corruption, they entered what I referred to as “a spiral of decline” in which the outflow of businesses and productive people undermines a city’s tax base and makes it increasingly difficult to turn things around. Portland exemplifies the pattern. Hemingway writes,
The city is also enduring a full-blown economic crisis. Businesses have been fleeing the city. As of last year, Portland had the highest commercial real estate vacancy rate of any major city in the country, and it remains at record levels. Anything above a 20% office vacancy rate is said to indicate “severe distress,” and Portland’s office vacancy rate is 34.6%. Powell’s Books, America’s largest independent bookstore and arguably the city’s most iconic retail operation, had four rounds of layoffs last year.
The city’s biggest office tower, the 42-story U.S. Bancorp building, was sold in 2015 for $372.5 million; last year it sold for $45 million. Residential real estate isn’t faring much better. In 2024, the Ritz-Carlton began selling luxury condos in a building downtown. Only 11 of the 132 condos have sold since then, and it recently announced its price was being slashed by 50%.
Corporations such as Nike and Columbia Sportswear are now rapidly moving their headquarters out of Portland. That will decrease the city’s tax base and increase unemployment as the city chases out productive, high-income people and welcomes those of little or no economic productivity. Hemingway writes,
Eric Fruits, an economics professor at Portland State University, repeatedly described the eroding tax base and other problems in the Oregon Business Report. “IRS migration data shows that people leaving [the] county average $105,800 in annual income, while arriving residents average $73,540—a gap of $32,260 per household. Over the past two years, roughly $1 billion annually has left the county,” writes Fruits. “They’re not leaving because of the weather.”
A backlash against Portland’s foolish and disastrous policies of the 2020s has arisen in the city, while the state government under progressive-left Gov. Tina Kotek adds to the problems by radically increasing taxes and spending. It will be exceedingly difficult for Portland to pull out of its downward spiral without a fundamental rejection of the extraordinary popular delusion that still infects city and state leaders and much of the voting public.
Sources: Heartland Daily News (99 pages of links to articles on the subject!); Real Clear Investigations
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